FS Investment Corporation IV 8-K  

Exhibit 10.1

Citibank, N.A.  390 Greenwich Street  New York, New York 10013

EXECUTION COPY

Transaction Reference Number:  __________

CONFIRMATION

Ladies and Gentlemen:

The purpose of this letter agreement is to set forth the terms and conditions of the Transactions entered into between Citibank, N.A. (“ Citibank ”) and Cheltenham Funding LLC, a limited liability company formed under the laws of the State of Delaware (“ Counterparty ”), on the Trade Date specified below (each, a “ Transaction ” and, collectively, the “ Transactions ”). This letter constitutes a “Confirmation” as referred to in the Master Agreement specified below.

The definitions and provisions contained in the 2000 ISDA Definitions (the “ Definitions ”), as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation shall govern. Capitalized terms used but not defined in this Confirmation have the meanings assigned to them in Annex A. Capitalized terms used but not defined in this Confirmation or in Annex A have the meanings assigned to them in the Definitions or (if not defined as aforesaid) in the Master Agreement referred to below.

With effect from and after the Eleventh Amendment Effective Date specified below, this Confirmation amends and restates the prior Confirmation dated as of January 19, 2016 and amended and restated as of April 12, 2016, June 3, 2016, June 30, 2016, January 19, 2017, July 19, 2017, September 5, 2017, January 19, 2018, July 19, 2018, January 19, 2019 and April 19, 2019 (the “ Original Confirmation ”) relating to the Transactions described herein, which Original Confirmation (with respect to the period from and after the Eleventh Amendment Effective Date) is hereby superseded and shall be of no further force or effect.

This Confirmation supplements, forms a part of and is subject to, the ISDA 2002 Master Agreement, dated as of January 19, 2016 (as amended, supplemented and otherwise modified and in effect from time to time, the “ Master Agreement ”), between Citibank and Counterparty. All provisions contained in the Master Agreement govern this Confirmation except as expressly modified below.

FS Investment Corporation IV (“ Guarantor ”) has guaranteed all of the present and future obligations of Counterparty under the Master Agreement pursuant to a guarantee dated as of the date hereof (the “ Guarantee ”) between Guarantor and Citibank. Guarantor will be a Credit Support Provider, and the Guarantee will be a Credit Support Document, with respect to Counterparty. The obligations of the Guarantor under the Guarantee shall, so long as no Event of Default in relation to Counterparty as Defaulting Party has occurred and is then continuing and no Early Termination Date has been designated by Citibank, terminate and be of no further force of effect on the Portfolio Criteria Satisfaction Date.

The terms of the particular Transactions to which this Confirmation relates are as follows:

Reference Obligation Removal

(a)             A Transaction may be terminated in whole by either party (or in part by Counterparty) in accordance with this Clause 3 by the giving of notice (an “ Accelerated Termination Notice ”) to the other party (each such termination, an “ Accelerated Termination ”).

Elective Termination by Citibank due to Certain Events

then Citibank may notify Counterparty in writing of such event. In the case of the foregoing clause (i), if such event continues for 30 days following the delivery of such notice, then Citibank will have the right but not the obligation to terminate the related Transaction. In the case of the foregoing clause (ii), if such event continues for 30 days following the delivery of such notice, then Citibank will have the right but not the obligation to terminate each Transaction that is the subject of this Confirmation. Citibank may exercise this termination right with respect to each Terminated Obligation by delivering an Accelerated Termination Notice to Counterparty that is given, as to any Terminated Obligation, (1) on the proposed Termination Trade Date and (2) no less than 10 days prior to the proposed Termination Settlement Date for the related Terminated Obligation. The Accelerated Termination Notice shall specify each Reference Obligation that is the subject of such Accelerated Termination and, with respect to each such Reference Obligation, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date.

Citibank Optional Termination Date

(c)           Citibank will have the right, but not the obligation, to terminate each Transaction that is the subject of this Confirmation, effective on any Business Day occurring on or after October 19, 2019 (such date, the “ Citibank Optional Termination Date ”). Citibank can exercise this termination right by delivering an Accelerated Termination Notice to Counterparty that is given no less than 30 days prior to the first proposed Termination Trade Date specified in the related Accelerated Termination Notice. The Accelerated Termination Notice shall specify, as to each Reference Obligation, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date. If Citibank does not exercise its right to terminate each Transaction that is the subject of this Confirmation on or before the date occurring 30 days prior to the Citibank Optional Termination Date, then Citibank will have the right, but not the obligation, to propose, by notice to Counterparty, to amend and restate one or more material terms of the Transactions, including, without limitation, the Spread, the Independent Amount Percentage, the Supplemental Independent Amount Percentage and the application of the Obligation Criteria and Portfolio Criteria to the Transactions. If Citibank provides a notice to Counterparty proposing to amend and restate one or more material terms of the Transactions as provided above and Counterparty does not agree in writing to such amended and restated terms within 10 Business Days after Citibank provides such notice to Counterparty, each Transaction shall terminate, and the Termination Trade Date shall be such tenth Business Day. In the event of any such termination, Citibank shall deliver an Accelerated Termination Notice to Counterparty, which shall specify, as to each Reference Obligation, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date. Even if a Termination Trade Date has been designated with respect to each Transaction pursuant to this Clause 3(c), such designation will not prevent Citibank or Counterparty from subsequently designating an earlier Termination Trade Date in relation to any Transaction to the extent Citibank or Counterparty, as the case may be, is entitled to designate such earlier Termination Trade Date pursuant to this Confirmation. Notwithstanding anything in this Confirmation to the contrary:

Early Termination Date under Master Agreement

(d)           If there is effectively designated an Early Termination Date under the Master Agreement, then (i) each Transaction will be terminated in its entirety (but without limiting Clause 4(c)), (ii) notwithstanding any contrary or otherwise inconsistent provision of the Master Agreement, the provisions set forth in Section 6(e) of the Master Agreement shall not apply to any Transaction (except that amounts that become due and payable on or prior to such Early Termination Date with respect to any Transaction as provided in this Confirmation will constitute Unpaid Amounts) and (iii) the Termination Trade Date for each Transaction will be the date specified by the Calculation Agent occurring on or promptly after such Early Termination Date; provided that, if such Early Termination Date is designated by reason of an Event of Default as to which Citibank is the Defaulting Party, Counterparty may specify the Termination Trade Date with respect to any Transaction as to which the Calculation Agent has not specified the Termination Trade Date within 10 days after such Early Termination Date. The Calculation Agent shall give notice (an “ Accelerated Termination Notice ”) to each party (such termination, an “ Accelerated Termination ”) on or prior to such Early Termination Date, which Accelerated Termination Notice shall specify each Reference Obligation that is the subject of such Accelerated Termination and, with respect to each such Reference Obligation, the amount of the Terminated Obligation, the proposed Termination Trade Date and the proposed Termination Settlement Date. The amount, if any, payable in respect of such Early Termination Date will be determined in accordance with Clause 4(b) of this Confirmation based upon the delivery of such Accelerated Termination Notice.

Effect of Termination

(e)           With respect to any Transaction terminated in whole pursuant to this Clause 3, (i) as of the relevant Termination Trade Date the Reference Amount shall, for all purposes hereof (including the determination of the “Maximum Portfolio Notional Amount”) other than calculating Rate Payments, be reduced to zero (and, in the case of a Committed Obligation, the Outstanding Principal Amount thereof shall be reduced to zero) and (ii) as of the relevant Termination Settlement Date the Reference Amount, for purposes of calculating Rate Payments, shall be reduced to zero (and, in the case of a Committed Obligation, the Outstanding Principal Amount thereof shall be reduced to zero). With respect to any Transaction terminated in part pursuant to this Clause 3, (i) as of the relevant Termination Trade Date the Reference Amount shall, for all purposes hereof (including the determination of the “Maximum Portfolio Notional Amount”) other than calculating Rate Payments, be reduced by the amount of the reduction of the Reference Amount specified in the Accelerated Termination Notice (and, in the case of a Committed Obligation, the Outstanding Principal Amount shall be reduced by an amount equal to the product of the Outstanding Principal Amount in effect immediately prior to such reduction multiplied by the amount of the reduction of the Reference Amount divided by the Reference Amount in effect immediately prior to such reduction) and (ii) as of the relevant Termination Settlement Date the Reference Amount shall, for purposes of calculating Rate Payments, be reduced by the amount of the reduction of the Reference Amount specified in the Accelerated Termination Notice (and, in the case of a Committed Obligation, the Outstanding Principal Amount shall be reduced by an amount equal to the product of the Outstanding Principal Amount in effect immediately prior to such reduction multiplied by the amount of the reduction of the Reference Amount divided by the Reference Amount in effect immediately prior to such reduction). Following any Termination Trade Date (other than the Termination Trade Date in respect of the Termination Date), Citibank shall promptly prepare and deliver to Counterparty a revised Annex I.

Following the termination of any Transaction in whole or in part pursuant to Clause 3 or by reason of the occurrence of the Scheduled Termination Date (other than in connection with a Repayment), the Final Price for the relevant Terminated Obligation will be determined in accordance with this Clause 4.

Determination by Counterparty

(a)           In order to determine the Final Price for any Terminated Obligation then held by or on behalf of Citibank as a hedge for the related Transaction if such determination is being made as the result of a termination pursuant to Clause 3(a), Counterparty may arrange for the sale of such Terminated Obligation by giving notice of such sale to Citibank; provided that Counterparty shall have no right to arrange a sale of a Terminated Obligation pursuant to this Clause 4(a) if, as a result of such termination and the termination of all other Transactions as to which the Total Return Payment Date has not yet occurred, after giving effect to such termination, a Delivery Amount (as defined in the Credit Support Annex) would be required under the Credit Support Annex to be transferred by Counterparty. Such notice must be given at least three Business Days prior to the related Termination Settlement Date in the case of any Terminated Obligation and at least 10 days prior to the Scheduled Termination Date if all Transactions are to be terminated in connection with the Scheduled Termination Date. Any sale (i) must be to an Approved Buyer or another buyer approved in advance by Citibank, such approval not to be unreasonably withheld or delayed, and (ii) must be scheduled to occur no later than the date customary for settlement, substantially in accordance with the then-current market practice in the principal market for such Terminated Obligation (as determined by the Calculation Agent), following the Termination Trade Date and prior to the Scheduled Termination Date if all Transactions are to be terminated in connection with the Scheduled Termination Date. If Counterparty so arranges any sale, the net cash proceeds received from the sale of any Terminated Obligation, net of the related Costs of Assignment and adjusted by any Delay Compensation as provided in Clause 6(b), shall be the “ Final Price ” for that Terminated Obligation.

Determination by Calculation Agent

(b)           If the Final Price for any Terminated Obligation is not determined according to Clause 4(a), the Calculation Agent shall attempt to obtain Firm Bids for such Terminated Obligation with respect to the applicable Termination Trade Date from two or more Dealers. The Calculation Agent will give Counterparty notice of its intention to obtain Firm Bids pursuant to this Clause 4(b) (such notice to be given telephonically and via electronic mail) not later than two hours prior to the bid submission deadline specified below. By notice to Citibank not later than the bid submission deadline specified below, Counterparty may, but shall not be obligated to, designate up to three Approved Buyers each of which shall provide a Firm Bid (and the Calculation Agent will seek a Firm Bid from any such designee so designated by Counterparty on a timely basis). A “ Firm Bid ” shall be a good and irrevocable bid for value, to purchase all or a portion of the applicable Terminated Obligation, expressed as a percentage of the Reference Amount of such Terminated Obligation and exclusive of accrued interest, for scheduled settlement substantially in accordance with the then-current market practice in the principal market for such Terminated Obligation, as determined by the Calculation Agent, submitted as of 11 a.m. New York time or as soon as practicable thereafter. If there is more than one Terminated Obligation at any time, then the Calculation Agent shall obtain Firm Bids solely with respect to each separate Terminated Obligation (but not with respect to any group or groups of such Terminated Obligations). Citibank may, but is not obligated to, sell or cause the sale of any portion of any Terminated Obligation to any Dealer that provides a Firm Bid.

If the Calculation Agent is unable to obtain from Dealers at least one Firm Bid or combination of Firm Bids for all of the Reference Amount of any Terminated Obligation with respect to the relevant Termination Trade Date, the Calculation Agent will attempt to obtain a Firm Bid or combination of Firm Bids for all of the Reference Amount of such Terminated Obligation from two or more Dealers until the earlier of (i) the second Business Day (inclusive) following such Termination Trade Date and (ii) the date a Firm Bid or combination of Firm Bids is obtained for all of the Reference Amount of such Terminated Obligation.

If the Calculation Agent is able to obtain at least one Firm Bid or combination of Firm Bids for all or any portion of the Reference Amount of any Terminated Obligation, the Final Price for such Terminated Obligation or portion thereof shall be determined by reference to such Firm Bid or Firm Bids pursuant to the last paragraph of this Clause 4(b). If no Firm Bids are obtained on or before such second Business Day for all or a portion of the applicable Terminated Obligation, the Final Price shall be deemed to be zero with respect to each portion of such Terminated Obligation for which no Firm Bid was obtained. The Calculation Agent will conduct the bid process in accordance with the procedures set forth in this Clause 4(b) and otherwise in good faith and in a commercially reasonable manner. Other than in the case of a termination pursuant to Clause 3(b) or 3(d), Citibank and Counterparty will make commercially reasonable efforts to accomplish the assignment to Counterparty (free of payment by Counterparty except for the prior payment when due of any related Counterparty Fifth Floating Amount) of the related Terminated Obligation or portion thereof held by or on behalf of Citibank as a hedge for the related Transaction for which the Final Price is deemed to be zero (including as provided below); provided that Citibank shall not be liable for any losses related to any delay in or failure of such assignment beyond its control.

Notwithstanding anything to the contrary herein,

If there is no such Firm Bid, then the Calculation Agent shall designate a new Termination Trade Date; provided that the Calculation Agent shall designate a new Termination Trade Date pursuant to this paragraph only once. If the highest Firm Bid for any portion of the related Terminated Obligation determined in connection with the second Termination Trade Date is disregarded pursuant to this paragraph, the Calculation Agent shall have no obligation to obtain further bids, and the applicable “ Final Price ” for the portion which was so disregarded shall be deemed to be zero.

If Citibank transfers, or causes the transfer of, all or any portion of the Terminated Obligation to the Dealer or Dealers providing the highest Firm Bid or highest combination of Firm Bids for such Terminated Obligation (or portion thereof) or to such other party as provided above, the net cash proceeds received from the sale of such Terminated Obligation or portion thereof (which sale shall be scheduled to settle substantially in accordance with the then-current market practice in the principal market for the related Reference Obligation as determined by the Calculation Agent), net of the related Costs of Assignment and adjusted by any Delay Compensation as provided in Clause 6(b), shall be the “ Final Price ” for that Terminated Obligation (or the portion thereof that is sold).

If Citibank has determined not to hold, or cause to be held, all or any portion of any Terminated Obligation as a hedge for the related Transaction or otherwise determines, in its sole discretion, not to sell or cause the sale of any portion of any Terminated Obligation to a Dealer providing the highest Firm Bid or combination of Firm Bids, the “ Final Price ” for such Terminated Obligation or portion thereof shall be equal to the highest Firm Bid (or highest combination of Firm Bids) for such Terminated Obligation (or portion thereof) multiplied by the Reference Amount of such Terminated Obligation (or the respective portions of the Reference Amount to which such Firm Bids relate). The Calculation Agent may perform any of its duties under this Clause 4(b) through any Affiliate designated by it, but no such designation shall relieve the Calculation Agent of its duties under this Clause 4(b).

Early Termination of Facility

(c)           For the avoidance of doubt (and subject to paragraph (ii) of the last sentence of Clause 3(c) and the definition of “Second Floating Amount” above), if the Termination Date occurs prior to the Citibank Optional Termination Date, each Counterparty Second Floating Amount shall continue to be payable by Counterparty on each subsequent Second Floating Rate Payer Payment Date occurring on or prior to the Scheduled Termination Date; provided that, if either party shall so specify in writing to the other party prior to any final Termination Trade Date, then on such final Termination Trade Date (i) the obligation of Counterparty to continue to pay each Counterparty Second Floating Amount on each subsequent Second Floating Rate Payer Payment Date occurring on or prior to the Scheduled Termination Date shall terminate and be replaced by the obligation in the following clause and (ii) Counterparty shall pay to Citibank an amount equal to the present value (as calculated by the Calculation Agent with discounting on a continuous basis) discounted to such final Termination Trade Date of each Counterparty Second Floating Amount payable (without regard to the termination of such obligation under the foregoing clause) on each subsequent Second Floating Rate Payer Payment Date occurring on or prior to the Scheduled Termination Date, at a discount rate per annum equal to the Discount Rate. For this purpose, the “ Discount Rate ” means the zero coupon swap rate (as determined by the Calculation Agent) implied by the fixed rate offered to be paid by Citibank under a fixed for floating interest rate swap transaction with a remaining Term equal to the period from such final Termination Trade Date to the Scheduled Termination Date in exchange for the receipt of payments indexed to USD-LIBOR-BBA.

If all or a portion of the Reference Amount of any Reference Obligation is repaid or otherwise reduced (in the case of a Committed Obligation, only if the Reference Amount thereof is permanently reduced) (including, without limitation, through any exercise of any right of set-off, reduction, or counterclaim that results in the satisfaction of the obligations of such Reference Entity to pay any principal owing in respect of such Reference Obligation) on or prior to the Scheduled Termination Date (the amount of such repayment or other reduction, a “ Repayment ”; the portion of the related Reference Obligation so repaid or otherwise reduced, a “ Repaid Obligation ”; and the date of such Repayment, the “ Repayment Date ”):

(a)           If any Reference Obligation or portion thereof is irreversibly converted or exchanged into or for any securities, obligations or other assets or property (“ Exchange Consideration ”), thereafter such Exchange Consideration will constitute such Reference Obligation or portion thereof, and, unless Citibank shall otherwise agree in writing, (i) if such Exchange Consideration fails to satisfy the Obligation Criteria, then Clause 3(b)(i) shall apply and (ii) if, on and after the Portfolio Criteria Satisfaction Date, the Portfolio Criteria set forth in Annex II would not be satisfied after giving effect to such exchange, then Clause 3(b)(ii) shall apply.

(b)           Delay Compensation (as defined below) shall result in an adjustment (i) as contemplated by the definition of “Interest and Fee Amount” in connection with the establishment by the Citibank Holder of a related hedge in respect of a Transaction, if the actual settlement of the purchase of the related hedge occurs after the Obligation Settlement Date and (ii) of a Final Price with respect to a Terminated Obligation in connection with the termination by the Citibank Holder of a related hedge, if the actual settlement of the sale of the related hedge occurs after the Termination Settlement Date. “ Delay Compensation ” shall accrue (x) in the case of clause (i) above, from and including the Obligation Settlement Date to but excluding the actual settlement of the purchase effected to establish the related hedge (and, during such period, (A) the Counterparty First Floating Amount shall be calculated by reference to the Spread and not the Floating Rate Option and (B) Interest and Fee Amounts will be determined without regard to payments in respect of the interest rate index, but will be determined inclusive of the applicable spread above such interest rate index, used in the Reference Obligation Credit Agreement to calculate interest payments in respect of the related Reference Obligation and in effect during such period) and (y) in the case of clause (ii) above, from and including the Termination Settlement Date to but excluding the actual settlement of the sale effected to terminate the related hedge (and, during such period, (A) the Counterparty First Floating Amount shall be calculated by reference to the Floating Rate Option and not the Spread and (B) Interest and Fee Amounts shall be reduced by interest accrued during such period in excess of the interest rate index used in the Reference Obligation Credit Agreement to calculate interest payments in respect of the related Reference Obligation and in effect during such period). In connection with any adjustment by reason of Delay Compensation, (i) any initial Payment Date in this Confirmation determined by reference to the “Obligation Settlement Date” shall be determined as if the Obligation Settlement Date were the actual settlement of the purchase of the related hedge and (ii) any final Payment Date in this Confirmation determined by reference to the “Termination Settlement Date” shall be determined as if the Termination Settlement Date were the actual settlement of the termination of the related hedge.

(c)           If (i) Citibank elects to establish a hedge as a result of the addition or increase in the Reference Amount of any Reference Obligation that is the subject of a Transaction and (ii) the Citibank Holder is unable after using commercially reasonable efforts to effect the settlement of such hedge, then, by notice to Counterparty, Citibank may in its sole discretion, specify that such addition or increase in the Reference Amount of such Reference Obligation shall be of no force or effect (retroactive to the Obligation Trade Date or the Obligation Settlement Date, as the case may be).

(d)           Counterparty will give prompt notice to Citibank of the occurrence of the Portfolio Criteria Satisfaction Date (which notice shall specify such date).

(a)           Each party hereby agrees as follows, so long as either party has or may have any obligation under any Transaction.

(b)           Each party acknowledges and agrees that, so long as either party has or may have any obligation under any Transaction:

(c)           Each of the parties hereby represents that, on each date on which a Transaction is entered into hereunder:

(d)           Counterparty hereby represents to Citibank that:

(e)          Except for any disclosure authorized pursuant to Clause 7(b)(v), Counterparty agrees to be bound by the confidentiality provisions of the related Reference Obligation Credit Agreement with respect to all information and documentation in relation to a Reference Entity or a Reference Obligation delivered to Counterparty hereunder. Counterparty acknowledges that such information may include material non-public information concerning the Reference Entity or its securities and agrees to use such information in accordance with applicable law, including Federal and State securities laws.

(f)          Multiple Transaction Payment Netting under Section 2(c) of the Master Agreement will apply to the Transactions to which this Confirmation relates.

(g)         Notwithstanding anything in the Master Agreement to the contrary, Citibank will not be required to pay any additional amount under Section 2(d)(i) of the Master Agreement in respect of any deduction or withholding for or on account of any Tax in relation to any payment under any Transaction that is determined by reference to interest or fees payable with respect to any Reference Obligation. If Citibank is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding for or on account of any Tax in relation to any payment under any Transaction that is determined by reference to interest or fees payable with respect to any Reference Obligation and Citibank does not so deduct or withhold, then Section 2(d)(ii) of the Master Agreement shall be applicable.

(a)          If (i) Citibank makes any payment to Counterparty as provided under Clause 2 and the corresponding Interest and Fee Amount is not paid (in whole or in part) when due or (ii) any Interest and Fee Amount in respect of a Reference Obligation is required to be returned (in whole or in part) by a holder of such Reference Obligation (including, without limitation, the Citibank Holder) to the applicable Reference Entity or paid to any other person or entity or is otherwise rescinded pursuant to any bankruptcy or insolvency law or any other applicable law, then Counterparty will pay to Citibank, upon request by Citibank, such amount (or portion thereof) so not paid or so required to be returned, paid or otherwise rescinded. If such returned, paid or otherwise rescinded amount is subsequently paid, Citibank shall pay such amount (subject to Clause 8(c)) to Counterparty within ten Business Days after the date of such subsequent payment.

(b)          If, with respect to any Repaid Obligation, the corresponding payment of principal of the Repaid Obligation is required to be returned (in whole or in part) by a holder thereof (including, without limitation, the Citibank Holder) to the applicable Reference Entity or paid to any other person or entity or is otherwise rescinded pursuant to any bankruptcy or insolvency law or any other applicable law, then (i) the parties hereto shall be restored severally and respectively to their former positions hereunder and thereafter all rights and obligations of the parties hereunder shall continue as though no Repayment had occurred and (ii) without limiting the generality of the foregoing, if either party has made a payment to the other party in respect of Capital Appreciation or Capital Depreciation related to such Repayment as provided under Clause 2, then the party that received the payment in respect of such Capital Appreciation or Capital Depreciation, as applicable, shall repay such amount (subject to Clause 8(c)) to the other party. If such returned, paid or otherwise rescinded amount is subsequently paid by the related Reference Entity or any such other person or entity, then the relevant party shall pay the amount of such Capital Appreciation or Capital Depreciation, as applicable, within ten Business Days after the date of such subsequent payment.

(c)          Amounts payable pursuant to this Clause 8 shall be subject to adjustment by the Calculation Agent in good faith and on a commercially reasonable basis, as agreed by Citibank and Counterparty, in order to preserve for the parties the intended economic risks and benefits of the relevant Transaction.

(d)          The payment obligations of Citibank and Counterparty pursuant to this Clause 8 shall survive the termination of all Transactions.

Notwithstanding anything in the Credit Support Annex (the “ Credit Support Annex ”) to the Schedule to the Master Agreement to the contrary, the following collateral terms shall apply to each Transaction to which this Confirmation relates (capitalized terms used in this Clause 9 but not otherwise defined in this Confirmation have the respective meanings given to such terms in the Credit Support Annex):

 New York, NY

(b)           The Office of Counterparty for each Transaction:

 Philadelphia, PA

Please confirm that the foregoing correctly sets forth the terms of our agreement by having a duly authorized officer of Counterparty execute this Confirmation and return the same by facsimile to the attention of the individual at Citibank indicated on the first page hereof.

Very truly yours,

CITIBANK, N.A.

CONFIRMED AND AGREED
AS OF THE DATE FIRST ABOVE WRITTEN:

CHELTENHAM FUNDING LLC

TRS Confirmation – Signature Page

ANNEX A

ADDITIONAL DEFINITIONS

“ Adjusted Notional Funded Amount ” means (A) in relation to any Reference Obligation that is a Committed Obligation (and the related Transaction) as of any date of determination, the greater of (a) zero and (b) the sum of (i) the Outstanding Principal Amount of such Reference Obligation as of such date of determination multiplied by the Current Price minus (ii) the product of (x) the excess, if any, of the Commitment Amount of such Reference Obligation as of such date over the Outstanding Principal Amount of such Reference Obligation as of such date multiplied by (y) 100% minus the Current Price; and (B) in relation to any Reference Obligation that is a Term Obligation (and the related Transaction) as of any date of determination, the Reference Amount of the related Reference Obligation as of such date multiplied by the Current Price in relation to such Reference Obligation.

“ Affiliate ”, for purposes of this Confirmation only, has the meaning given to such term in Rule 405 under the Securities Act of 1933, as amended.

“ Approved Buyer ” means (a) any entity listed in Annex III hereto (as such Annex may be amended by mutual written consent of the parties hereto from time to time) so long as its long-term unsecured and unsubordinated debt obligations on the “trade date” for the related purchase or submission of a Firm Bid contemplated hereby are rated at least “A2” by Moody’s and at least “A” by S&P and (b) if an entity listed in Annex III hereto is not the principal banking or securities Affiliate within a financial holding company group, the principal banking or securities Affiliate of such listed entity within such financial holding company group so long as such obligations of such Affiliate have the rating indicated in clause (a) above.

“ Capital Appreciation ” and “ Capital Depreciation ” mean, for any Total Return Payment Date, the amount determined according to the following formula for the applicable Terminated Obligation or Repaid Obligation:

Final Price – Applicable Notional Amount

where

“ Final Price ” means (a) in the case of any Terminated Obligation, the amount determined pursuant to Clause 4, and (b) in the case of any Repaid Obligation, the amount determined pursuant to Clause 5, and

“ Applicable Notional Amount ” means the Notional Funded Amount (determined immediately prior to the related Repayment Date or Termination Trade Date) for such Terminated Obligation or Repaid Obligation, as applicable.

If such amount is positive, such amount is “ Capital Appreciation ” and if such amount is negative, the absolute value of such amount is “ Capital Depreciation ”.

“ Committed Obligation ” means (a) any Delayed Drawdown Reference Obligation and (b) any Revolving Reference Obligation.

“ Costs of Assignment ” means, in the case of any Terminated Obligation, the sum of (a) any actual costs of transfer or assignment paid by the seller under the terms of any Terminated Obligation or otherwise actually imposed on the seller by any applicable administrative agent, borrower or obligor incurred in connection with the sale of such Terminated Obligation and (b) any reasonable expenses incurred by the seller in connection with such sale and, if transfers of the Terminated Obligation are subject to the Standard Terms and Conditions for Distressed Trade Confirmations, as published by the LSTA and as in effect on the Obligation Trade Date, reasonable legal costs incurred by the seller in connection with such sale, in each case to the extent not already reflected in the Final Price.

“ Credit Event ” means the occurrence of a Bankruptcy or Failure to Pay. For purposes of the determination of whether a Credit Event has occurred, the Obligation Category will be Borrowed Money, the Payment Requirement will be USD1,000,000 and no Obligation Characteristics will be specified. Capitalized terms used in this definition but not defined in this Confirmation shall have the meanings specified in the 2003 ISDA Credit Derivatives Definitions.

“ Current Price ” means, with respect to any Reference Obligation on any date of determination, the Calculation Agent’s determination of the net cash proceeds that would be received from the sale on such date of determination of such Reference Obligation, net of the related Costs of Assignment. If Counterparty disputes the Calculation Agent’s determination of the Current Price of any Reference Obligation, then Counterparty may, no later than two hours after Counterparty is given notice of such determination, (a) designate up to two entities, each of which shall be either (i) an Approved Buyer or (ii) a Dealer of credit standing acceptable to Citibank in the exercise of its reasonable discretion and (b) provide to Citibank within such two-hour period with respect to each such Approved Buyer or Dealer a Firm Bid with respect to the entire Reference Amount of the Reference Obligation. The higher of such two Firm Bids will be the Current Price. The “Current Price” shall be expressed as a percentage of par and will be determined exclusive of accrued interest.

“ Dealer ” means (a) any nationally recognized independent dealer in the related Reference Obligation chosen by the Calculation Agent or its designated Affiliate, (b) any Approved Buyer or other entity designated by the Calculation Agent and having a credit standing acceptable to Citibank and (c) any Approved Buyer designated by Counterparty pursuant to Clause 4(b).

“ Delayed Drawdown Reference Obligation ” means a Reference Obligation that (a) requires the holder thereof to make one or more future advances to the borrower under the instrument or agreement pursuant to which such Reference Obligation was issued or created, (b) specifies a maximum amount that can be borrowed on one or more fixed borrowing dates and (c) does not permit the re-borrowing of any amount previously repaid; provided that, on any date on which all commitments by the holder thereof to make advances to the borrower under such Delayed Drawdown Reference Obligation expire or are terminated or reduced to zero, such Reference Obligation shall cease to be a Delayed Drawdown Reference Obligation.

“ Designated Reference Obligation ” means any Reference Obligation that (a) is not a Specified Reference Obligation, (b) has as of the Obligation Trade Date a Moody’s Rating of at least B2 and an S&P Rating of at least B, (c) is on the Obligation Trade Date part of a fungible class of debt obligations (as to issuance date and all economic terms) of at least USD500,000,000, (d) has an Initial Price as of the Obligation Trade Date of at least 90% and (e) is on the Obligation Trade Date the subject of at least five bid quotations from nationally recognized independent dealers in the related obligation as reported on a nationally recognized pricing service.

“ Expense or Other Payment ” means the aggregate amount of any payments (other than extensions of credit) due from the lender(s) in respect of any Reference Obligation, including, without limitation, (a) any expense associated with any amendment, modification or waiver of the provisions of a credit agreement, (b) any reimbursement of any agents under the provisions of a credit agreement, and (c) any indemnity or other similar payment, including amounts owed on or after the related Obligation Termination Date in respect of amounts incurred or any event that occurred before the related Obligation Termination Date.

“ Financial Sponsor ” means any entity, including any subsidiary of another entity, whose principal business activity is acquiring, holding and selling investments (including controlling interests) in otherwise unrelated companies that each are distinct legal entities with separate management, books and records and bank accounts, whose operations are not integrated one with another and whose financial condition and creditworthiness are independent of the other companies so owned by such entity.

“ Interest and Fee Amount ” means, for any Citibank Fixed Amount Payer Payment Date and any Transaction, the aggregate amount of interest (including interest breakage costs), fees (including, without limitation, amendment, consent, tender, facility, letter of credit and other similar fees) and other amounts (other than in respect of principal and premium paid in respect of principal) paid with respect to the related Reference Obligation (after deduction of any withholding taxes for which the Reference Entities are not obligated to reimburse holders of the related Reference Obligation, if applicable) during the relevant Citibank Fixed Amount Payer Calculation Period; provided that Interest and Fee Amounts:

“ Loan ” means any obligation for the payment or repayment of borrowed money that is documented by a term loan agreement, revolving loan agreement or other similar credit agreement.

“ LSTA ” means The Loan Syndications and Trading Association, Inc. and any successor thereto.

“ Moody’s ” means Moody’s Investors Service, Inc. or any successor thereto.

“ Moody’s Rating ” means, with respect to a Reference Obligation, as of any date of determination:

For purposes of the foregoing, a “private rating” shall refer to a rating obtained by Citibank, by Counterparty or by or on behalf of an obligor on a Reference Obligation that is not disseminated publicly; whereas a “shadow rating” shall refer to a credit estimate obtained upon application of Counterparty or a holder of a Reference Obligation. Any private rating or shadow rating shall be required to be refreshed annually. If Counterparty applies to Moody’s for a shadow rating or public rating of a Reference Obligation, Counterparty shall provide evidence to Citibank of such application and shall notify Citibank of the expected rating. Counterparty shall notify Citibank of the shadow rating or public rating assigned by Moody’s to a Reference Obligation.

“ Portfolio Criteria Satisfaction Date ” means the first date on which the Reference Portfolio satisfies the Portfolio Criteria; provided that, solely for purposes of this definition, the Portfolio Target Amount shall at all times be equal to the Portfolio Notional Amount.

“ Portfolio Target Amount ” means (a) during the Ramp-Up Period and the Ramp-Down Period, the Maximum Portfolio Notional Amount and (b) at any other time, the Portfolio Notional Amount.

“ Rate Payments ” means Counterparty First Floating Amounts, Counterparty Second Floating Amounts, Counterparty Third Floating Amounts and Citibank Fixed Amounts.

“ Reference Obligation Credit Agreement ” means any term loan agreement, revolving loan agreement or other similar credit agreement governing a Reference Obligation.

“ Revolving Reference Obligation ” means a Reference Obligation that (a) requires the holder thereof to make one or more future advances to the borrower under the instrument or agreement pursuant to which such Reference Obligation was issued or created, (b) specifies a maximum aggregate amount that can be borrowed and (c) permits, during any period on or after the date on which the holder thereof acquires such Reference Obligation, the re-borrowing of any amount previously repaid; provided that, on the date that all commitments by the holder thereof to make advances to the borrower under such Revolving Reference Obligation expire or are terminated or reduced to zero, such Reference Obligation shall cease to be a Revolving Reference Obligation.

“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, or any successor thereto.

“ S&P Rating ” means, with respect to a Reference Obligation:

(A) if application has been made to S&P to rate a Reference Obligation and such Reference Obligation has a Moody’s Rating, then the S&P Rating with respect to such Reference Obligation shall, pending the receipt of such rating from S&P, be equal to the S&P Rating that is equivalent to such Moody’s Rating and (y) Reference Obligations in the Reference Portfolio constituting no more, by aggregate Notional Amount, than 10% of the Portfolio Target Amount may be given a S&P Rating based on a rating given by Moody’s as provided in clause (x) (after giving effect to the addition of the relevant Reference Obligation, if applicable); and

(B) for up to 10% of the Portfolio Target Amount, the S&P Rating may be determined in accordance with the methodologies for establishing the Moody’s Rating except that the S&P Rating of such obligation will be (1) one sub-category below the S&P equivalent of the Moody’s Rating if such Moody’s Rating is “Baa3” or higher and (2) two sub-categories below the S&P equivalent of the Moody’s Rating if such Moody’s Rating is “Ba1” or lower.

“ Second Lien Obligation ” means a Loan that is secured by collateral, but as to which the beneficiary or beneficiaries of such collateral security agree for the benefit of the holder or holders of other indebtedness secured by the same collateral (“ First Lien Debt ”) as to one or more of the following: (1) to defer their right to enforce such collateral security either permanently or for a specified period of time while First Lien Debt is outstanding, (2) to permit a holder or holders of First Lien Debt to sell such collateral free and clear of the security in favor of such beneficiary or beneficiaries, (3) not to object to sales of assets by the obligor on such Loan following the commencement of a bankruptcy or other insolvency proceeding with respect to such obligor or to an application by the holder or holders of First Lien Debt to obtain adequate protection in any such proceeding and (4) not to contest the creation, validity, perfection or priority of First Lien Debt.

“ Specified Reference Obligation ” means any Reference Obligation whose inclusion in the Reference Portfolio (other than as a “Specified Reference Obligation”) would not on the related Obligation Trade Date satisfy:

“ Subordinate ” means, with respect to an obligation (the “ Subordinated Obligation ”) and another obligation of the obligor thereon to which such obligation is being compared (the “ Senior Obligation ”), a contractual, trust or similar arrangement (without regard to the existence of preferred creditors arising by operation of law or to collateral, credit support, lien or other credit enhancement arrangements or provisions regarding the application of proceeds of any of the foregoing) providing that (i) upon the liquidation, dissolution, reorganization or winding up of the obligor, claims of the holders of the Senior Obligation will be satisfied prior to the claims of the holders of the Subordinated Obligation or (ii) the holders of the Subordinated Obligation will not be entitled to receive or retain payments in respect of their claims against the obligor at any time that the obligor is in payment arrears or is otherwise in default under the Senior Obligation.

“ Term Obligation ” means any Reference Obligation that is not a Committed Obligation.

“ Terminated Obligation ” means any Reference Obligation or portion of any Reference Obligation that is terminated pursuant to Clause 3.

“ Termination Settlement Date ” means, for any Terminated Obligation, the date customary for settlement, substantially in accordance with the then-current market practice in the principal market for such Terminated Obligation (as determined by the Calculation Agent), of the sale of such Terminated Obligation with the trade date for such sale occurring on the related Termination Trade Date.

“ Termination Trade Date ” means, with respect to any Terminated Obligation, the date so designated in the related Accelerated Termination Notice; provided that:

The Calculation Agent shall notify the parties of any Termination Trade Date designated by it pursuant to the foregoing proviso.

“ Total Return Payment Date ” means, with respect to any Terminated Obligation or Repaid Obligation, the tenth Business Day next succeeding the last day of the Monthly Period during which the related Obligation Termination Date occurs.

ANNEX I

ANNEX II

Obligation Criteria

The “ Obligation Criteria ” are as follows:

Portfolio Criteria

The “ Portfolio Criteria ” are as follows:

For purposes hereof:

“ Moody’s Industry Classification Groups ” means each of the categories set forth in Table 1 below.

“ Weighted Average Rating ” means, as of any date of determination, the number obtained by (a) multiplying the Notional Amount of each Reference Obligation by the applicable Rating Factor (as set forth in Table 2 below) for the related Reference Entity; (b) summing the products obtained in clause (a) for all Reference Obligations; and (c) dividing the sum obtained in clause (b) by the aggregate of the Notional Amounts of all Reference Obligations.

Table 1

Moody’s Industry Classification Groups

Aerospace & Defense 

Automotive 

Banking, Finance, Insurance and Real Estate 

Beverage, Food, & Tobacco 

Capital Equipment 

Chemicals, Plastics, & Rubber 

Construction & Building 

Consumer goods: durable 

Consumer goods: non-durable 

Containers, Packaging, & Glass 

Energy: Electricity 

Energy: Oil & Gas 

Environmental Industries 

Forest Products & Paper 

Healthcare & Pharmaceuticals 

High Tech Industries 

Hotel, Gaming, & Leisure 

Media: Advertising, Printing & Publishing 

Media: Broadcasting & Subscription 

Media: Diversified & Production 

Metals & Mining 

Retail 

Services: Business 

Services: Consumer 

Sovereign & Public Finance 

Telecommunications 

Transportation: Cargo 

Transportation: Consumer 

Utilities: Electric 

Utilities: Oil & Gas 

Utilities: Water 

Wholesale

Annex III

Approved Buyers

Bank of America, NA 

The Bank of Montreal 

The Bank of New York Mellon, N.A. 

Barclays Bank plc 

BNP Paribas 

Calyon 

Canadian Imperial Bank of Commerce 

Citibank, N.A. 

Credit Agricole S.A. 

Credit Suisse 

Deutsche Bank AG 

Dresdner Bank AG 

Goldman Sachs & Co. 

HSBC Bank 

JPMorgan Chase Bank, N.A. 

Merrill Lynch, Pierce, Fenner & Smith Incorporated 

Morgan Stanley & Co. 

Natixis 

Northern Trust Company 

Royal Bank of Canada 

The Royal Bank of Scotland plc 

Societe Generale 

The Toronto-Dominion Bank 

UBS AG 

U.S. Bank, National Association 

Wachovia Bank National Association 

Wells Fargo Bank, National Association

FS Investment Corporation IV 8-K  

Exhibit 10.2

EXECUTION COPY

SCHEDULE

to the

ISDA 2002 Master Agreement

dated as of January 19, 2016

(amended and restated as of June 28, 2019)

between

CITIBANK, N.A.,  

a national banking association organized under the laws of the United States

(“ Party A ”)

and

CHELTENHAM FUNDING LLC,  

a limited liability company formed 

under the laws of the State of Delaware 

(“ Party B ”)

With effect from and after June 28, 2019 (the “ Amendment Effective Date ”), this Schedule to the ISDA 2002 Master Agreement (without the Credit Support Annex thereto) amends and restates the prior Schedule to the Master Agreement dated as of January 19, 2016 (without the Credit Support Annex thereto, the “ Original Schedule ”), which Original Schedule (with respect to the period from and after the Amendment Effective Date) is hereby superseded and shall be of no further force or effect. The Original Schedule, as amended and restated hereby, is the Schedule to the Master Agreement dated as of January 19, 2016 between Party A and Party B. Except as expressly provided in this amended and restated Schedule, said Master Agreement shall remain unchanged and in full force and effect. Any reference to the “Schedule” or words of similar import in said Master Agreement or any Confirmation exchanged thereunder shall be a reference to the Original Schedule, as amended and restated hereby, and as the same may be further amended, supplemented and otherwise modified and in effect from time to time.

Part 1

Termination Provisions

In this Agreement:

(a)           “ Specified Entity ” means:

(i)       in relation to Party A, for the purpose of Section 5(a)(v) of this Agreement, Citigroup Global Markets Limited, Citigroup Global Markets Inc., Citigroup Global Markets Commercial Corp., Citicorp Securities Services, Inc., Citibank Europe PLC, Citigroup Global Markets Deutschland AG, Citigroup Energy Inc., Citibank Japan Ltd., Citibank Canada, Citigroup Energy Canada ULC and Citigroup Financial Products Inc. (individually a “ Section 5(a)(v) Affiliate ”), and for all other purposes not applicable; and

(ii)       in relation to Party B, for the purpose of Sections 5(a)(v), 5(a)(vi), 5(a)(vii) and 5(b)(v) of this Agreement, FS Investment Corporation IV, a Maryland corporation (the “ Party B Investor ”).

(b)          “ Specified Transaction ” will have the meaning specified in Section 14 of this Agreement. For purposes of clause (c) of such definition, Specified Transaction includes any securities options, margin loans, short sales, and any other similar transaction now existing or hereafter entered into between Party A or any Section 5(a)(v) Affiliate, on the one hand, and Party B or any Specified Entity of Party B, on the other hand.

(c)          The “ Cross Default ” provisions of Section 5(a)(vi) will apply to Party A and will apply to Party B; provided that, notwithstanding the foregoing, an Event of Default shall not occur under either (1) or (2) therein if (a) the event or condition referred to in (1) or the failure to pay referred to in (2) is a failure to pay caused by an error or omission of an administrative or operational nature; (b) funds were available to such party to enable it to make the relevant payment when due; and (c) such relevant payment is made within three Local Business Days following the discovery of the error or failure.

For purposes of Section 5(a)(vi), the following provisions apply:

“ Specified Indebtedness ” shall have the meaning set forth in Section 14 of this Agreement; provided that Specified Indebtedness shall not include deposits received in the course of a party’s ordinary banking business.

“ Threshold Amount ” means

(i) with respect to Party A, 2% of the stockholders’ equity of Party A; 

(ii) with respect to Party B, USD100,000; and 

(iii) with respect to the Party B Investor, the lesser of USD10,000,000 and 2% of the Net Asset Value of the Party B Investor;

including the U.S. Dollar equivalent on the date of any default, event of default or other similar condition or event of any obligation stated in any other currency.

For purposes of the above, stockholders’ equity shall be determined by reference to the relevant party’s most recent consolidated (quarterly, in the case of a U.S. organized party) balance sheet and shall include, in the case of a U.S. organized party, legal capital, paid-in capital, retained earnings and cumulative translation adjustments. Such balance sheet shall be prepared in accordance with accounting principles that are generally accepted in such party’s country of organization.

For purposes of the above, “ Net Asset Value ” means, in relation to the Party B Investor, its net asset value calculated in accordance with the requirements of the Investment Company Act of 1940, as amended, and all applicable rules and regulations promulgated under the U.S. Federal securities laws, including Regulation S-X.

(d)          The “ Credit Event Upon Merger ” provisions of Section 5(b)(v) of this Agreement will apply to Party A and will apply to Party B (and to the Party B Investor).

(e)          The “ Automatic Early Termination ” provisions of Section 6(a) will not apply to Party A and will not apply to Party B; provided, however , that with respect to a party, where the Event of Default specified in Section 5(a)(vii)(1), (3), (4), (5), (6) or to the extent analogous thereto, (8) is governed by a system of law which does not permit termination to take place after the occurrence of the relevant Event of Default, then the Automatic Early Termination provisions of Section 6(a) will apply to such party.

(f)          “ Termination Currency ” means United States Dollars.

(g)         “ Additional Termination Event ”: The following shall constitute Additional Termination Events (and, with respect to each such Additional Termination Event other than that provided under clause (14) below, Party B will be the sole Affected Party, and all Transactions will be Affected Transactions):

(1)          Without Party A’s prior written consent, (x) the Party B Investor changes its jurisdiction of organization and/or organizational form from a corporation incorporated under the laws of the State of Maryland or (y) any amendment, supplement or other modification is made to the articles of incorporation or bylaws of the Party B Investor, in each case, to the extent such change, amendment, supplement or other modification has, or could reasonably be expected to have, a Material Adverse Effect.

(2)          Without Party A’s prior written consent, (x) Party B changes its jurisdiction of organization and/or organizational form from a limited liability company formed under the laws of the State of Delaware or (y) any amendment, supplement or other modification is made to the limited liability company agreement of Party B, in each case, to the extent such change, amendment, supplement or other modification has, or could reasonably be expected to have, a Material Adverse Effect.

(3)          The Party B Investor ceases to be the sole owner, beneficially and of record, of all of the equity ownership interests issued by Party B.

(4)          The Party B Investor or any legal successor thereto (the “ Manager ”) ceases to be the manager of Party B or ceases to have authority to enter into transactions pursuant to this Agreement on behalf of Party B and shall not have been replaced by another person or entity as to which Party A has not made an objection, having a reasonable basis, in writing within 10 Business Days following notice.

(5)          The Party B Investor fails to maintain FSIC IV Advisor, LLC, or a successor thereto acceptable to Party A in its sole discretion (the “ Investment Advisor ”) as its sole investment adviser.

(6)          [Intentionally Omitted].

(7)          Party B fails to comply with its investment strategies and/or restrictions as in effect on the date hereof to the extent such non-compliance has, or could reasonably be expected to have, a Material Adverse Effect.

(8)          Party B incurs, assumes or otherwise becomes liable in respect of any Specified Indebtedness (other than any Specified Indebtedness arising under any Transaction hereunder).

(9)          The Party B Investor or Party B shall dissolve or liquidate.

(10)       There occurs any material change to or departure from a Fundamental Policy of the Party B Investor or Party B that relates to Party B’s performance of its obligations under this Agreement without the prior consent of Party A (which consent shall not be unreasonably withheld).

(11)       The Party B Investor violates Section 18, as modified by Section 61, of the 1940 Act.

(12)       The Party B Investor violates Section 55(a) of the 1940 Act.

(13)       The Party B Investor’s election to be subject to the provisions of Sections 55 through 65 of the 1940 Act pursuant to Section 54(a) of the 1940 Act is revoked by order of the Securities and Exchange Commission or is withdrawn by the Party B Investor pursuant to Section 54(c) of the 1940 Act.

(14)        If, after the parties hereto have entered into one or more Transactions, (x) due to the adoption of or any change in any applicable law or regulation (including, without limitation, a change with respect to Section 18 of the 1940 Act or any rule or regulation promulgated thereunder) or (y) due to the announcement of or any change in the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law or regulation (including any action taken by the U.S. Securities Exchange Commission), Party B determines that it will, or has, become illegal for Party B or materially detrimental to Party B’s interests to perform its obligations in respect of one or more such Transactions. For purposes of this Additional Termination Event, both parties hereto will be the Affected Parties and all Transactions will be Affected Transactions.

Notwithstanding the foregoing, (i) a merger of the Party B Investor with or into FS KKR Capital Corp., FS Investment Corporation II, FS Investment Corporation IV or Corporate Capital Trust II (each a “ Permitted BDC ”) or other fundamental change transaction the result of which effectively combines the ownership and/or assets of the Party B Investor and one or more Permitted BDCs and (ii) any publicly announced other transaction or series of transactions, the result of which is that Party B is a direct or indirect wholly-owned subsidiary of a business development company advised by a joint venture entity between (x) KKR Credit Advisors (US) LLC (and any successor entity thereto) or its Affiliate and (y) Franklin Square Holdings, L.P. (and any successor entity thereto) or its Affiliate, shall not constitute a Termination Event or an Additional Termination Event.

As used herein:

“ 1940 Act ” means the Investment Company Act of 1940, as amended.

“ Fundamental Policy ” means any policies of the Party B Investor that may not be changed without the vote of the owners of shares of common stock of the Party B Investor.

“ Material Adverse Effect ” means a material adverse effect on (a) the ability of Party B or its Credit Support Provider to perform any of its obligations under this Agreement or any Credit Support Document to which Party B or its Credit Support Provider is a party, (b) the rights of or benefits available to Party A under this Agreement or any Credit Support Document to which Party B or its Credit Support Provider is a party, (c) the authority of the Manager to act as Party B’s agent in entering into and confirming Transactions and in receiving notices to Party B under this Agreement or (d) whether any Transaction shall be consistent with the then-current and applicable investment policies, trading strategies and/or restrictions of Party B and the Party B Investor.

Part 2

Tax Representations

(a)        Payer Representations. For the purpose of Section 3(e) of this Agreement, Party A will make the following representation and Party B will make the following representation:

It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 9(h) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on (i) the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement, (ii) the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement and (iii) the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement, except that it will not be a breach of this representation where reliance is placed on clause (ii) above and the other party does not deliver a form or documents under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position.

(b)        Payee Representations. For the purpose of Section 3(f) of this Agreement, Party A and Party B make the representations specified below, if any:

The following representations will apply to Party A:

It is a national banking association organized under the laws of the United States, and its U.S. taxpayer identification number is 13-5266470.

It is “exempt” within the meaning of Treasury Regulation sections 1.6041-3(p) and 1.6049-4(c) from information reporting on Form 1099 and backup withholding.

The following representations will apply to Party B:

Party B is a limited liability company organized under the laws of the State of Delaware.

Party B is a disregarded entity for U.S. Federal income tax purposes.

The Party B Investor is a corporation incorporated under the laws of the State of Maryland, and its U.S. taxpayer identification number is 47-3258730.

The Party B Investor is a regulated investment company for U.S. Federal income tax purposes.

Part 3  

Agreement to Deliver Documents

For the purpose of Section 4(a) of this Agreement:

I. Tax forms, documents or certificates to be delivered are:

II. Other documents to be delivered are:

Part 4  

Miscellaneous

(a)          Addresses for Notices. For the purpose of Section 12(a) of this Agreement:

Address for notices or communications to Party A:

388 Greenwich Street, 17 ^th Floor

New York, New York 10013

Attention:         Director Derivatives Operations

Facsimile No.: 212-816-5550

(For all purposes)

Address for notices or communications to Party B:

Attention: William Goebel 

Phone: 215-220-4247 

Fax: 215-339-1931 

Email: Bill.Goebel@fsinvestments.com

(b)           Process Agent. For the purpose of Section 13(c) of this Agreement:

Party A appoints as its Process Agent: Not Applicable

Party B appoints as its Process Agent: Not Applicable

(c)           Offices. The provisions of Section 10(a) will apply to this Agreement.

(d)           Multibranch Party. For the purpose of Section 10(b) of this Agreement:

Party A is a Multibranch Party and may enter into a Transaction through any of the following offices: New York, London, Singapore and Sydney.

Party B is not a Multibranch Party.

(e)           Calculation Agent. The Calculation Agent will be Party A unless otherwise specified in a Confirmation in reference to the relevant Transaction.

(f)            Credit Support Document.

(i)        In relation to Party A, the Credit Support Annex dated as of the date hereof and attached hereto between the parties hereto; and

(ii)        In relation to Party B, (1) the Credit Support Annex dated as of the date hereof and attached hereto between the parties hereto, (2) the Account Control Agreement referred to in said Credit Support Annex and (3) the guarantee dated as of the date hereof (the “Party B Investor Guarantee”) made by the Party B Investor in favor of Party A.

(g)           Credit Support Provider.

(i) In relation to Party A, none; and

(ii) In relation to Party B, so long as the Party B Investor Guarantee remains in effect, the Party B Investor.

(h)           Governing Law. This Agreement shall be construed in accordance with, and this Agreement and all matters arising out of or relating in any way whatsoever to this Agreement (whether in contract, tort or otherwise) shall be governed by, the law of the State of New York.

(i)            Jurisdiction. Section 13(b)(i) of this Agreement is hereby amended by deleting in line 2 of paragraph 2 the word “non-” and by deleting paragraph (iii) thereof. The following shall be added at the end of Section 13(b): “Nothing in this provision shall prohibit a party from bringing an action to enforce a money judgment in any other jurisdiction.”

(j)          “ Affiliate ” will have the meaning specified in Section 14 of this Agreement.

(k)          Absence of Litigation . For the purpose of Section 3(c), “Specified Entity” means in relation to Party A, any Affiliate of Party A, and in relation to Party B, each Specified Entity referred to in Part 1 of this Schedule.

(l)           No Agency . The provisions of Section 3(g) will apply to this Agreement.

(m)         Additional Representation will apply. Section 3(a) of this Agreement is hereby amended by the deletion of “and” at the end of Section 3(a)(iv); the substitution of a semi-colon for the period at the end of Section 3(a)(v) and the addition of Sections 3(a)(vi) to (viii), as follows:

“(vi) Relationship Between Parties . Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction):

(1)        No Reliance . It is acting for its own account, and it has made its own independent decisions to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. It has not received from the other party any assurance or guarantee as to the expected results of that Transaction.

(2)        Evaluation and Understanding . It is capable of evaluating and understanding (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the financial and other risks of that Transaction.

(3)        Status of Parties . The other party is not acting as a fiduciary for or an advisor to it in respect of that Transaction.

(vii)         Eligible Contract Participant . At the time of each Transaction entered into under this Agreement, each of Party A and Party B represents to the other that it is an eligible contract participant as defined in Section 1a(18) of the U.S. Commodity Exchange Act (“ CEA ”) and CFTC Regulations promulgated thereunder (an “ ECP ”).

(viii)        ERISA. The assets that are used in connection with the execution, delivery and performance of this Agreement and the Transactions entered into pursuant hereto are not (i) the assets of an “employee benefit plan” (within the meaning of Section 3(3)) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or other plan subject to Title I of ERISA, (ii) a plan described in Section 4975 of the Internal Revenue Code of 1986, as amended (the “Code”), (iii) an entity whose underlying assets include “plan assets” by reason of Department of Labor regulation section 2510.3-101 (as modified by Section 3(42) of ERISA), or (iv) a governmental plan that is subject to any federal, state, or local law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code.”

(n)         “ Netting of Payments ” Either party may notify the other in writing, not less than one Local Business Day in advance of one or more Scheduled Payment Dates, that with regard to payments due on that date, Multiple Transaction Payment Netting will apply; provided that no such notice shall be required with respect to any Transaction if the related Confirmation expressly provides that Multiple Transaction Payment Netting will apply. Except to the extent that such advance written notice shall have been given or as is specified in a related Confirmation, subparagraph Multiple Transaction Payment Netting will not apply for purposes of Section 2(c) of this Agreement.

Part 5

Other Provisions

(a)        Waiver of Right to Trial by Jury . EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDING. Each party hereby (i) certifies that no representative, agent or attorney of the other has represented, expressly or otherwise, that the other would not, in the event of a Proceeding, seek to enforce the foregoing waiver and (ii) acknowledges that it has been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this paragraph.

(b)        Severability . Except as otherwise provided in Sections 5(b)(i) or 5(b)(ii) in the event that any one or more of the provisions contained in this Agreement should be held invalid, illegal, or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby. The parties shall endeavor, in good faith negotiations, to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

(c)        Netting. In the event that any Terminated Transaction cannot be aggregated and netted against all other Terminated Transactions under Section 6(e) of this Agreement, such excluded Terminated Transactions shall be aggregated and netted amongst themselves to the fullest extent permitted by law.

(d)        Escrow Payments. If by reason of the time difference between the cities in which payments are to be made, it is not possible for simultaneous payments to be made on any date on which both parties are required to make payments hereunder, either party may at its option and in its sole discretion notify the other party that payments on that date are to be made in escrow. In this case the deposit of the payment due earlier on that date shall be made by 2:00 p.m. (local time at the place for the earlier payment) on that date with an escrow agent selected by the party giving the notice, accompanied by irrevocable payment instructions (i) to release the deposited payment to the intended recipient upon receipt by the escrow agent of the required deposit of the corresponding payment from the other party on the same date accompanied by the irrevocable payment instructions to the same effect or (ii) if the required deposit of the corresponding payment is not made on that same date, to return the payment deposited to the party that paid it into escrow. The party that elects to have payments made in escrow shall pay the costs of the escrow arrangements and shall cause those arrangements to provide that the intended recipient of the payment due to be deposited first shall be entitled to interest on that deposited payment for each day in the period of its deposit at the rate offered by the escrow agent for that day for overnight deposits in the relevant currency in the office where it holds that deposited payment (at 11:00 a.m. local time on that day) if that payment is not released by 5:00 p.m. on the date it is deposited for any reason other than the intended recipients’ failure to make the escrow deposit it is required to make hereunder in a timely fashion.

(e)        Recording of Conversations . Each party hereto consents to the recording of its telephone conversations relating to this Agreement or any potential Transaction.

(f)          [Intentionally Omitted]

(g)          2002 Master Agreement Protocol . The parties agree that the definitions and provisions contained in Annexes 1 to 16 and Section 6 of the 2002 Master Agreement Protocol published by the International Swaps and Derivatives Association, Inc. on 15th July 2003 are incorporated into and apply to this Agreement.

(h) Additional Party B Representations . Section 3 of this Agreement is hereby amended by the addition of the following representations (which shall be made solely by Party B to Party A):

(h)       Compliance with Investment Policies. The execution, delivery, and performance by Party B of this Agreement and each Confirmation does not conflict with or violate the investment policies, trading strategies and/or restrictions of the Party B Investor as set forth in the offering and organizational documents, in each case as in effect from time to time, of the Party B Investor.

(i)        Manager Authorized as Agent . The Manager is duly authorized to act as Party B’s agent in entering into and confirming Transactions and receiving notices to Party B under this Agreement, and the Manager’s entering into or confirmation of any Transaction shall be sufficient to bind Party B, with the result that Party B’s signature shall not be required on any Confirmation.

(j)        Compliance with 1940 Act . The Party B Investor has elected to be subject to the provisions of Sections 55 through 65 of the 1940 Act pursuant to Section 54(a) of the 1940 Act. Party B will enter into any Transaction in compliance with its investment policies; the execution of this Agreement by Party B, the entry by Party B into any Transaction hereunder, and the performance of its obligations hereunder and under each Transaction, will not result in a violation by the Party B Investor of any provision of the 1940 Act applicable to business development companies. The Party B Investor has disclosed in its prospectus or other offering documents that it may enter into transactions of the type contemplated by this Agreement, to the extent required by applicable laws and regulations. The Board of Directors of the Party B Investor, or its equivalent, has given all necessary approvals for the Party B Investor (either directly or through a subsidiary) to enter into this Agreement and any Transaction. The Party B Investor is not a person of which Party A is an “affiliated person”, or an affiliated person of an affiliated person, within the meaning of Section 2(a)(3) of the 1940 Act.

(k)        Assets of Party B . All of the assets of Party B are available to satisfy the obligations of Party B under this Agreement.

(l)        Obligations Pari Passu . The obligations of Party B to Party A under this Agreement rank at least pari passu with all other senior unsecured indebtedness of Party B.

Party B covenants that (i) it will not take any action during the term of any Transaction that would render any of the representations and warranties in this Part 5(h) untrue and (ii) it will take all necessary action during the term of each Transaction to cause such representations and warranties to continue at all times to be true.

(i)            Manager Representations. The following representations shall be made by the Manager in accordance with Section 3 of this Agreement as if the Manager was a party to this Agreement:

“(i) Manager Representations . The Manager represents and warrants to Party A (x) that it is duly authorized to act as Party B’s agent in entering into and confirming Transactions and in receiving notices to Party B under this Agreement, and (y) that any Transaction shall be entered into in accordance with the applicable investment policies, trading strategies and/or restrictions of Party B and the Party B Investor as are then in effect.

(ii) No Investment Advice from Party A . The Manager represents and agrees that no advice given by Party A or its Affiliates shall form a primary basis for any decision by or on behalf of the Manager relating to any Transaction under or in connection with this Agreement, that neither Party A nor any of its Affiliates is or shall be a fiduciary or advisor with respect to the Manager or Party B and that no amounts paid or to be paid to Party A or its Affiliates are attributable to any advice provided by Party A or its Affiliates.”

(j)            Additional Party B Covenant. For purposes of Section 4 of this Agreement, the following shall be added immediately following paragraph (e) thereof:

“(f) Notification Requirements. Party B shall notify Party A in writing immediately upon the occurrence of any of the following: (i) any Additional Termination Event in relation to Party B, (ii) a material change in the investment policies of Party B or the Party B Investor as they relate to derivatives transactions, borrowing, leverage or other matters arising under Section 18 of the 1940 Act (as modified by Section 61 of the 1940 Act) and Section 55(a) of the 1940 Act; (iii) the entry by Party B, the Party B Investor or the Manager into an agreement that would result in the merger, change in control or reorganization of Party B, the Party B Investor or the Manager; (iv) Party B or the Party B Investor or the Manager becomes aware of the commencement of litigation or regulatory action against Party B, the Party B Investor or the Manager that has, or could reasonably be expected to have, a Material Adverse Effect; or (v) the independent public accountant of the Party B Investor resigns, is dismissed, or issues a report on the Party B Investor’s financial statements that contains an adverse opinion or disclaimer of opinion, or issues an opinion that is qualified or modified as to uncertainty, audit scope or audit principles.”

(k)        [Intentionally Omitted] .

(l)          Recourse Limited to Party B . Notwithstanding anything to the contrary contained in this Agreement, the Schedule or any Confirmation or other document issued or delivered in connection with any Transaction entered into under this Agreement, any amounts owed or liabilities incurred by Party B hereunder or in respect of any Transaction entered into under this Agreement, shall be satisfied solely from the assets of Party B and no recourse whether by set-off or otherwise, shall be had to the assets of the Manager or any director, officer or employee or partner of Party B or the Manager or any of their Affiliates, except that the foregoing will not limit service of process on Party B by delivery of notice on its behalf to Party B.

(m)        Limitation on Liability . No party shall be required to pay or be liable to the other party for any consequential, indirect or punitive damages, opportunity costs or lost profits; provided that the foregoing shall not limit any party’s obligation to make any amount otherwise payable in accordance with the express provisions of this Agreement.

(n)        Foreign Account Tax Compliance Act . The parties agree that the definitions and provisions contained in the ISDA 2012 FATCA Protocol as published by the International Swaps and Derivatives Association, Inc. on August 15, 2012, are incorporated into and apply to this Agreement as if set forth in full herein.

(o)        ISDA HIRE Act Protocols . The parties agree that solely as between Party A and Party B, the definitions and provisions contained in the (x) Attachment to the ISDA 2010 Short Form HIRE Act Protocol published by the International Swaps and Derivatives Association, Inc. on November 30, 2010 (“ Short Form Protocol Attachment ”) and (y) 2015 Section 871(m) Protocol published by the International Swaps and Derivatives Association, Inc. on November 2, 2015, will be deemed to be incorporated herein, mutatis mutandis, as though such definitions and provisions were set out in full herein, with any such conforming changes as are necessary to deal with what would otherwise be inappropriate or incorrect cross references. The parties further agree that the Implementation Date (as such term is defined in the Short Form Protocol Attachment) shall be the date of execution of this Agreement.

(p)        Notification of Right To Segregate Independent Amounts . With respect to funds or other property provided to margin, guarantee or secure obligations for Uncleared Swaps entered into under this Agreement, to the extent mandated by the Dodd-Frank Act, Party B has the right to require segregation of such funds or other property (other than variation margin) at an independent third party custodian. This notification is deemed repeated each time Party B enters into an Uncleared Swap with Party A. For purposes of this paragraph, the term “Uncleared Swap” means a Transaction that is a “swap” as defined in the CEA section 1(a)(47) and CFTC regulation 1.3(xxx) that is not subject to the CFTC’s mandatory clearing requirement under CEA section 2(h) and CFTC regulations promulgated thereunder.

(q)        ISDA 2018 U.S. Resolution Stay Protocol . The parties agree that the definitions and provisions contained in the ISDA 2018 U.S. Resolution Stay Protocol and Attachment thereto (“ U.S. Stay Protocol ”) as published by the International Swaps and Derivatives Association, Inc. on July 31, 2018 are hereby incorporated into and apply to this Agreement as if set forth in full in this Schedule.  For these purposes, the following terms as used in the U.S. Stay Protocol shall have the following meanings: “Regulated Entity” shall mean Party A and “Protocol Covered Agreement” or “Covered Agreement”, as applicable, shall mean this Agreement.

[ Signature Page Follows. ]

IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document.

ISDA Master Schedule